Achieving price parity between plant-based and animal-based foods in retail has the potential to impact the food industry significantly. If plant-based and animal-based products were priced more equally, it would be a win-win for producers/brands, retailers, consumers, and the overall plant-based market.
In its latest New Food Hub article, ProVeg International examines the economic implications that could result from more competitive pricing of plant-based products.
High retail margins
Plant-based options are currently priced at a premium compared to animal-based products. While the gap is smaller for more developed categories like milk and butter, the disparity in plant-based meat remains high. Nielsen data demonstrates that, on average, plant-based meat is twice as expensive as beef, more than four times as expensive as chicken, and more than three times as expensive as pork per pound. For example, Beyond Meat’s Beyond Burger retails at £19.03 per kg, compared to Tesco’s premium own-label beef burger, which retails at £8.81 per kg![1] Retailers, especially, are pricing plant-based products too highly – with margins of 35-50% typical across Europe (compared to 8% for animal-based meat products).[2]
The old wisdom says high prices can offset the low turnover of slow-moving stock. Some retailers believe they need high margins on plant-based products to offset wastage risk. But that logic is circular – rotation is low because of over-pricing.
Manufacturers are calling on retailers and brands to lower their margins to make plant-based alternatives more accessible to the mainstream. “We push our private label customers not to charge too high on the main market,” explains Frank Giezen, Co-founder of major European manufacturer Ojah. “This indirectly puts pressure on the brands to lower their prices too.”
Almost 40% of European consumers now identify as either vegan, vegetarian, pescatarian, or flexitarian.[3] This means that there’s a huge total addressable market. By reducing retail margins and lowering prices, businesses can attract more of the flexitarian mass market and increase turnover.
However, retailers don’t want to portray plant-based products as cheap. And rightly so, food consultant Jack Bobo of Futurity Foods agrees: “I don’t know anybody who wants cheap food. I know people who want quality food at affordable prices. […] The language of cheapness undermines your product – it turns it into a commodity […] When it comes to psychology, they should be talking about quality and affordability.”
Experts are unanimous in this regard: they’re calling for plant-based foods to be presented as high-quality products (a matter of language) at affordable prices (a matter of margins).
Price is a barrier
In the recent Smart Protein Project consumer survey, 38% of European respondents cited price as the most significant obstacle to purchasing plant-based alternatives, followed by taste (30%)[4]. For those eating plant-based proteins less often than they did previously, more than a quarter (26%) of consumers state that affordability is the reason.[5]
“You’ll buy the product once based on novelty, you’ll come back if the taste was good and if there are benefits such as nutrition and sustainability, and you’ll buy it in the long run if the value is right,” comments Nick Halla, Senior Vice President for International at Impossible Foods.
To ensure they remain accessible to consumers and compete with conventional products, alternative proteins must achieve levels of affordability that unlock the largest market – flexitarians (or mixed-eaters). As producers increasingly scale up production, achieve economies of scale, and seek price parity with conventional products/competitors, ProVeg anticipates the price gap shrinking, but this also depends on retailers playing their part.
What would happen if price parity was reached?
Head over to ProVeg’s New Food Hub to read the full article and uncover the benefits of price parity for brands and retailers and strategies for achieving price parity.
For more support with your alternative protein strategy, get in touch with ProVeg at corporate@proveg.org.
[1] Plant based meats – the battle for price parity, (2024). New Food Innovation. Available at: https://www.new-foodinnovation.co.uk/price-parity. Access 2024-05-29.
[2] Insights from ProVeg interviews in 2021.
[3] Evolving appetites: an in-depth look at European attitudes towards plant-based eating, (2023). The Smart Protein project. Available at: Evolving appetites: an in-depth look at European attitudes towards plant-based eating – Smart Protein Project. Accessed 2024-03-20.
[4] Evolving appetites: an in-depth look at European attitudes towards plant-based eating, (2023). The Smart Protein project. Available at: Evolving appetites: an in-depth look at European attitudes towards plant-based eating – Smart Protein Project. Accessed 2024-03-20.
[5] US plant-based proteins report, (2023). Mintel. Available at: https://store.mintel.com/report/us-plant-based-proteins-market-report. Accessed 2024-05-29.
